I’ve often seen pieces comparing the economies of blue states and red states, with blue states generally coming out ahead. I was skeptical but interested in a piece by Kerry Jackson of the Pacific Research Institute on how California measures the worst in some important categories.
Guess which state has the highest poverty rate in the country? Not Mississippi, New Mexico, or West Virginia, but California, where nearly one out of five residents is poor. That’s according to the Census Bureau’s Supplemental Poverty Measure, which factors in the cost of housing, food, utilities and clothing, and which includes noncash government assistance as a form of income.
Given robust job growth and the prosperity generated by several industries, it’s worth asking why California has fallen behind, especially when the state’s per-capita GDP increased approximately twice as much as the U.S. average over the five years ending in 2016 (12.5%, compared with 6.27%).
It’s not as though California policymakers have neglected to wage war on poverty. Sacramento and local governments have spent massive amounts in the cause. Several state and municipal benefit programs overlap with one another; in some cases, individuals with incomes 200% above the poverty line receive benefits. California state and local governments spent nearly $958 billion from 1992 through 2015 on public welfare programs, including cash-assistance payments, vendor payments and “other public welfare,” according to the Census Bureau. California, with 12% of the American population, is home today to about one in three of the nation’s welfare recipients.
The generous spending, then, has not only failed to decrease poverty; it actually seems to have made it worse.
In the late 1980s and early 1990s, some states — principally Wisconsin, Michigan, and Virginia — initiated welfare reform, as did the federal government under President Clinton and a Republican Congress. Tied together by a common thread of strong work requirements, these overhauls were a big success: Welfare rolls plummeted and millions of former aid recipients entered the labor force.
The state and local bureaucracies that implement California’s antipoverty programs, however, resisted pro-work reforms. In fact, California recipients of state aid receive a disproportionately large share of it in no-strings-attached cash disbursements. It’s as though welfare reform passed California by, leaving a dependency trap in place.
The Census Bureau has been using the Supplemental Poverty Measure since 2011, so this isn’t a weird thing cooked up recently by the Trump administration.
Since the publication of the first official U.S. poverty estimates, researchers and policymakers have continued to discuss the best approach to measure income and poverty in the United States. Beginning in 2011, the Census Bureau began publishing the Supplemental Poverty Measure (SPM), which extends the official poverty measure by taking account of many of the government programs designed to assist low-income families and individuals that are not included in the official poverty measure. This is the seventh report describing the SPM, released by the U.S. Census Bureau, with support from the Bureau of Labor Statistics (BLS). This report presents updated estimates of the prevalence of poverty in the United States using the official measure and the SPM based on information collected in 2017 and earlier Current Population Survey Annual Social and Economic Supplements (CPS ASEC).
Their website provides an explanation.
In 2010, an interagency technical working group asked the U.S. Census Bureau and the U.S. Bureau of Labor Statistics to develop a new measure that would improve our understanding of the economic well-being of American families and enhance our ability to measure the effect of federal policies on those living in poverty. The technical design of the supplemental poverty measure draws on the recommendations of a 1995 National Academy of Sciences report and the extensive research on poverty measurement conducted over the past 20 years. See the history of poverty measures in the United States infographic.
President Johnson’s 1964 declaration of his “War on Poverty” generated a new interest in measuring just how many people were in poverty and how that changed over time.
On September 12, 2017, the Census Bureau will release the seventh report on the supplemental poverty measure, containing estimates for the 2016 calendar year. The report presents estimates for the official and supplemental poverty measures and discusses differences between the two measures. A comparison of the major concepts is detailed in the table below and in this infographic.
We measure poverty two ways every year. The official poverty measure is based on cash resources. The supplemental poverty measure uses cash resources and also includes noncash benefits and subtracts necessary expenses (such as taxes and medical expenses).
The official poverty measure compares an individual’s or family’s pretax cash income to a set of thresholds that vary by the size of the family and the ages of the family members. These official poverty calculations do not take into account the value of in-kind benefits, such as those provided by nutrition assistance or housing and energy programs. Nor do they take into account regional differences in living costs or expenses, such as housing.
The supplemental poverty measure takes into account family resources and expenses not included in the official measure as well as geographic variation. First, it adds the value of in-kind benefits that are available to buy basic goods to cash income. In-kind benefits include nutritional assistance, subsidized housing and home energy assistance. Then it subtracts necessary expenses for critical goods and services not included in the thresholds from resources. Necessary expenses that are subtracted include income taxes, Social Security payroll taxes, child care and other work-related expenses, child support payments to another household, and contributions toward the cost of medical care and health insurance premiums.
Thresholds used in the supplemental poverty measure are produced by the Bureau of Labor Statistics Division of Price and Index Number Research using Consumer Expenditure Survey data that show how much people spend on basic necessities (food, clothing, shelter and utilities) and are adjusted for geographic differences in the cost of housing. The supplemental poverty measure thresholds are not intended to assess eligibility for government assistance.